We received a call last week from a client  who had a requirement to reissue 1099′s from 2011. The problem was that although the dollar amounts on the 1099′s as reported were correct, some of the EIN’s (and SSN’s) had been entered incorrectly and not corrected prior to issuance. When this occurs, the IRS requires that the issuer zero out the 1099′s that were issued with the incorrect EIN’s, and reissue them with the corrected EIN’s. So, we easily reopened calendar year 2011, and entered an adjustment 1099 to zero out the dollars on the 1099′s that were originally issued with errors and printed those, and then we reprinted the 1099′s that had both the correct dollar amounts and the corrected EIN’s. No additional postings to a previously closed year were required, and the amounts reflected in the General Ledger remained unchanged. The problem was resolved, and the client was pleased that SYMPAQ featured  the native “flexibility” to make the necessary corrections without resorting to external inputs.

To be sure, there is a line to be drawn between an accounting software package that is highly flexible, but has few internal controls and is not inherently DCAA compliant, and a software package that is both flexible and has the required internal controls required by government contractors. SYMPAQ features tight internal controls and a highly visible audit trail, combined with the flexibility you would expect from modern accounting software.

Pre-Award BI

If you use FedBizOpps to identify opportunities that fit your expertise and a separate CRM system to manage those opportunities, there is an inexpensive, user-friendly and highly flexible subscription based solution for government contractors called EZGovOpps that combines contracting opportunities with a built-in CRM component to enable you and your team to identify and collaborate on capture efforts.

Post-Award BI

If you use Excel 2010, and are adept at using pivot tables, there is a free add-on from Microsoft called Power Pivot that can be downloaded and added to your Excel workbook.  Power Pivot enables you to connect to any SQL database or other relational database to enable “Self-Service BI” within the familiar setting of your Excel spreadsheet.  You can easily connect to SYMPAQ SQL’s database via its native ODBC driver to access tens of  thousands of rows of data within your spreadsheet, and use Power Pivot to gain insights into your cost accounting data.

This is nothing new. Contractors and auditors have had a contentious relationship over the years, and it was only exacerbated by the 2008 GAO report that was critical of the DCAA . Auditors will tell you that part of their mission is the dis-allowance of billed costs and the recovery of such costs on behalf of the federal  government. While it is never a good idea to be uncooperative with DCAA auditors, it is a good idea to spend as much face time as possible with them while they’re on your premises and to not leave them alone with your accounting records as they further their mission. As they question costs, it is always good to be there to provide answers, because otherwise you might not get the benefit of the doubt. Not that you have anything to hide, but remember they are looking to find ”unallowable” costs that they can recoup on behalf of the US Government. It has been found that companies who leave the auditors to their own devices will be given a negative audit report more often that not. Having an “acceptable” and  compliant cost accounting system (such as SYMPAQ) that features a clear audit trail will definitely help make the auditor’s job easier, but they are looking for deficiencies in your costing and billing practices and nothing is going to change with respect to their primary focus.

For more on the survey:

FINAL17thSurvey

The truth is there is no ballpark figure as such, or at least no more of one than you’d likely get if you were to ask a general contractor to give you an estimate for remodeling your kitchen without first seeing your kitchen, or for putting an addition on your home without seeing your home. At its core, an accounting software package is a database built around a set of business rules and algorithms. And,  given the available feature set, how much of the system do you intend to utilize? Is it 100% of the available feature set? Perhaps 75%? An independent research study revealed that 45% of a software systems’ features and functions are never used!*  This is because there are many variables. For instance, you might process Payroll in-house or you might outsource it to a third-party service bureau. If it is the latter, then obviously the integrated payroll feature set will not be utilized and there are no related costs associated with its implementation.

You should also consider your role in the process  and keep the following organizational factors in mind that happen to be beyond the control of your software vendor:

•  The amount of your internal accounting staff involvement during the implementation,

•   Staff skill level,

•   Daily workloads during the time of implementation, affecting the amount of time given to concentrate on the implementation.

Always remember to include your internal staff and their time while preparing your budget, because your vendor works in tandem with your staff and delegates responsibilities to them when practical. You don’t want a high-priced consultant doing routine data entry, do you? At the same time, if you would like to have your existing data converted and imported, then be sure to include a budget line item for data transformation.

A software vendor could calculate the average costs of professional services billed to its past several customers and use that as a basis for an estimate, but that would not necessarily yield a meaningful budget figure. The bottom line is that without first conducting a survey to gauge expectations and assigning resources on the front-end of the conversion process, it is just not possible for a software vendor to accurately estimate the time and dollars involved with the goal of getting “up and running”.

* Where do unused features come from?

While it may generally be true that fixed-price contracts do not require DCAA incurred cost audits, you still must justify your cost structure in a pre-award audit with certain FFP contract types.  When your contract is a fixed price incentive contract, for instance,  FAR 16.4 stipulates, “This contract type may be used only when—(1) The contractor’s accounting system is adequate for providing data to support negotiation of final cost and incentive price revision; and (2) Adequate cost or pricing information for establishing reasonable firm targets is available at the time of initial contract negotiation.”

While some FFP contract types (e.g., sealed bid) that are beneath a predetermined dollar threshold may not require supporting cost data, several fixed price contract types do require an adequate accounting system. Besides, don’t you think it would be a good idea to have an accurate picture of your cost structure when bidding on any type of contract, be it fixed price or otherwise?

“IS THE ACCOUNTING SYSTEM CURRENTLY IN FULL OPERATION? (if not, describe in Section I Narrative which portions are (1) in operation, (2) set up, but not yet in operation, (3)   anticipated, or (4) nonexistent.)”

Having an adequate accounting system that is not in full operation will count somewhat less than having a non-compliant system that is, so don’t fool yourself into believing that your investment in a compliant accounting package that you’re not currently utilizing will enable you to get past the preaward scrutiny of the DCAA. They’ll likely stump you when it comes to the last question on the SF1408.

SF1408

Travel Expenses: They will also be looking closer at Per Diem expenses for unallowable overages based on your location.

Best of luck with splitting time spent on business development from time spent on marketing. And make sure that business lunch is within your M&IE limits.

The answer is nothing. It doesn’t exist. DCAA does not approve accounting systems. When DCAA audits your company, they are auditing policies, procedures, and the implementation of whatever accounting software you may be using. I won’t go as far as to say every accounting system can be made to be compliant, either. SYMPAQ has the built in audit trails and reports that a DCAA auditor will be examining, so accounting system acceptability when implemented, is much more likely. However, if you have SYMPAQ properly implemented, but have poorly documented accounting policies and procedures, you can potentially fail your audit. If you have good timekeeping policies, but are using QuickBooks which lacks internal controls, you might just fail your audit.

A DCAA audit is a three-legged stool. Software is only one of the legs, and arguably, the easiest one to get right. You should be very skeptical of any vendor or consultant that says a software package will make you DCAA approved. The DCAA does not work like that.

It’s a myth that subcontractors don’t need to have a compliant cost accounting system. The reforms in late 2008 made prime contractors responsible for ensuring the adequacy of their subcontractor’s accounting systems and procedures. Prime contractors are besieged daily by smaller companies wanting to subcontract for them. If your company isn’t compliant, the  prime can find another sub that is, and they will. The best way to avoid that is to put a compliant system in place before your prime forces the issue. If you are proactive and take the steps to get compliant, and you market that fact to your primes, you will be in a position to pick up work when other subcontractors fail to maintain an adequate (by DCAA standards) accounting system.

SYMPAQ is built on the Microsoft SQL Server database. SQL Server has native support for Excel. It is easy to connect Excel to your SYMPAQ database to automate the updating of spreadsheets with periodic data. In addition, SYMPAQ features the the F9 Financial Reporter, an Excel add-in that gives you very powerful and flexible financial reporting capabilities. It even simplifies preparation of the DCAA’s ICE submission schedules.

If you spending any time  punching data into Excel, then stop! Contact us for more information on how SYMPAQ can give you financial data within Excel to enable better decision making, all with much less effort than you are putting forth today when you are maintaining a collection of spreadsheets that you manually update.

Part 16 – Types of Contracts (adequate contractor’s accounting system is required for most contract types)

Part 30 – Cost Accounting Standards Administration (application of CASB rules and regulations to negotiated contracts)

Part 31 – Contract Cost Principals and Procedures (allowable and unallowable costs)

Part 32 – Contract Financing (progress payments based on costs)

Part 42 – Contract Administration and Audit Services (direct reference to DCAA and a subpart on indirect cost rates)

Part 52 – Solicitation Provisions and Contract Clauses (invoicing, limitation on payments, limitation of funds, allowable costs and payment)

These are the six specific sections of the FAR that you should most concern yourself with in relation to your current  accounting software and its suitability for government contracting. To be sure, there are other parts of the FAR that are relevant and where it would be desirable to have an adequate cost accounting system in operation, such as Part 43 (Contract Modifications) and Part 49 (Termination of Contracts). However, the six parts as outlined above are most pertinent when it comes to your internal capacity and controls to administer and report on negotiated federal contracts and, most importantly, be prepared for follow-on DCAA audits. SYMPAQ is one of only a few commercially available accounting and timekeeping packages that provide true FAR compliance.

You should ask yourself these types of questions when preparing for an audit. If you are comfortable with your answers, then you are probably ready for an audit.

• Do my procedures and accounting records follow Generally Accepted Accounting Principles?
• Are my indirect costs segregated from my direct costs?
• Are my unallowable costs segregated from both direct and indirect costs?
• Is my timekeeping system set up in a manner that would pass an audit?
• Are my employees ready for a timesheet floorcheck audit?
• If I were to pull a sample of timecards, would the timecard, job cost summary, paycheck detail, and the billing invoice all agree?
• Am I following all guidelines as explained in the Joint Travel Regulations for direct travel?
• Are all employees following policies and procedures set by the company? It’s important to remember that company policies need to be followed as well as FAR regulations.

Audits are a fact of life when selling to the government. However, by insuring that you have compliant systems and processes in place before the audit, they don’t have to stressful!

Source.

This is clearly going to be a challenge for this particular subcontractor, and by having to pull in outside professional help to assist with the work at hand – very expensive!  When you add up the hourly billing rates multiplied by the level of effort required to create the various schedules, the expense associated with not using a cost accounting system with the capability to produce the ICE submission far exceeds the cost savings of using shrink-wrapped accounting software that is not specifically designed for cost reimbursable government contracts. Your “affordable” accounting software that seemingly worked just fine up until this point is now costing you money. So it really comes down to is this; did you save too much on your accounting software?

QuickBooks has no native ability to calculate and allocate burdened costs. When you need burdened costs to support a cost-plus proposal or an audit, you don’t want to calculate them “off-line” in a spreadsheet.

You Spend More Time Working Around QuickBooks Than Working In It

If you are wrangling multiple spreadsheets to manage data that should be available easily from your project accounting system, and you are formatting invoices in Excel, it is time to look for an accounting system that can work for you and not against you.

You Are Entering The Same Data Into Two Or More Systems

Manually moving data from a timekeeping system to QuickBooks, or moving data from QuickBooks manually back to Excel for analysis and reporting purposes wastes time and introduces opportunities for error. An integrated system improves work flow and reduces errors. If you like utilizing Excel for financial analysis, SYMPAQ includes a reporting tool that seamlessly reads your General Ledger and updates your reporting spreadsheets with the most current data automatically. If you have cost plus contracts and need to produce the annual ICE schedules, SYMPAQ can save you hours and hours of work. SYMPAQ provides your indirect cost profile anytime you need it.

More Than One Person Needs Access to Core Financial Data

QuickBooks is primarily a desktop application. It lacks the internal controls and audit trail features that are necessary in a system of adequate internal controls in a multi-user accounting department.

Quickbooks is a fine bookkeeping tool, but as you grow, internal controls and getting visibility into your true cost structure become more important, and not just for DCAA reasons. These are important factors for your business even you don’t worry about DCAA audits. For example, SYMPAQ will generate your invoices accurately to ensure quick processing by your customers, and cash flow is your business’s lifeblood.

“Adding Value” is, of course, subjective. Auditors will be looking for evidence that subcontracting out the majority of a contract is a net benefit for the government. If you are a prime with contracts that are fulfilled by subs in excess of the 70% threshold, be prepared to justify how that decision “adds value” for your government customer.

“The Dept. of Labor has dramatically increased the number of auditors devoted to reviewing government contracts for Service Contract Act (SCA) compliance. Enforcement efforts will focus not only on contractor compliance, but on the actions of the prime’s subcontractors as well. Penalties for noncompliance include withholding of contract payments, contract cancellation, even debarment.”

Centre Consulting provides training services to both the government and commercial sectors, and they are also a SYMPAQ user. If your existing accounting system doesn’t comply with Service Contract Act requirements and you have SCA covered contracts in your business mix, you should know that SYMPAQ has built-in functionality for mandated health and welfare fringe benefit payouts for non-exempt employees who perform on such contracts.

Change Is Scary
Your accounting staff is probably very comfortable with the status quo. Even though trying to extract data from your start-up bookkeeping tool and wrangle it into spreadsheets creates a lot of work and frustration for everybody, it is a known quantity. Logically, the entire staff may understand that the upgrade to SYMPAQ will enhance DCAA compliance, improve reporting, and reduce work for everybody. But it is still change, and change can be scary. Also, your staff may be experts in how you do business today, but are not excited about the effort and work involved to adapt to how you’ll do business tomorrow. We’d like to believe that everybody will embrace the opportunity to improve internal operations, however, the real world doesn’t work that way. Many people are quite happy with the status quo.

Ignorance Is Bliss
What you don’t know can’t hurt you right? If your company has been growing quickly, your staff is probably operating at maximum capacity just to keep up. If you are busy and growing, then all of your projects must be well run, right? Well, what if they aren’t? Accounting software without rigorous internal controls make it easy to cover up mistakes or malfeasance by simply editing the books after the fact. A compliant cost accounting system doesn’t allow for that. Everything will be captured in an audit trail; making it much harder to hide the truth.

Accountability
If it’s hard to get visibility into project performance, then it is hard to see problems looming on the horizon. Likewise, it is hard to hold anybody accountable for the failure (or success!) of any individual project.

Upgrading accounting software, or any major internal system, involves many technical and operational issues. Your company must  adequately plan for the conversion to realize the benefits. Don’t forget about your people though. If they aren’t on board,  the upgrade will go poorly, or fail.

• Be more aggressive in regard to system and internal control audits.
• Increase its scrutiny of incurred cost submissions.

SYMPAQ resolves both of these issues. Every transaction in SYMPAQ is logged, posted and available for audit review in one database. Likewise, all the data elements necessary for an ICE submission are contained within SYMPAQ. You won’t need to collate data from disparate sources and manually wrangle with complicated spreadsheets to calculate indirect rates that you hope are correct. If you use SYMPAQ, you know the numbers come from a reliable accounting tool that was engineered specifically to produce data for this particular purpose.